Framing Qwest/Shielding AT&T

“USA Today reported in May 2006 that Qwest, unlike AT&T and Verizon, balked at helping the NSA track phone calling patterns that may have indicated terrorist organizational activities. Nacchio’s attorney, Herbert Stern, confirmed that Nacchio refused to turn over customer telephone records because he didn’t think the NSA program had legal standing.”

Documents Say Qwest Was Targeted

The National Security Agency and other government agencies retaliated against Qwest because the Denver telco refused to go along with a phone spying program, documents released Wednesday suggest.

The documents indicate that likely would have been at the heart of former CEO Joe Nacchio’s so-called “classified information” defense at his insider trading trial, had he been allowed to present it.

The secret contracts — worth hundreds of millions of dollars — made Nacchio optimistic about Qwest’s future, even as his staff was warning him the company might not make its numbers, Nacchio’s defense attorneys have maintained. But Nacchio didn’t present that argument at trial.

The documents suggest U.S. District Judge Edward Nottingham refused to allow Nacchio to present the argument about retaliation. Nottingham also said Nacchio would have to take the stand to raise the classified defense.

Prosecutors have said they were prepared to poke holes in Nacchio’s classified defense.

Nacchio was convicted last spring on 19 counts of insider trading for $52 million of stock sales in April and May 2001, and sentenced to six years in prison. He’s free pending appeal.

The partially redacted documents were filed under seal before, during and after Nacchio’s trial. They were released Wednesday.

Nacchio planned to demonstrate at trial that he had a meeting on Feb. 27, 2001, at NSA headquarters at Fort Meade, Md., to discuss a $100 million project. According to the documents, another topic also was discussed at that meeting, one with which Nacchio refused to comply.

The topic itself is redacted each time it appears in the hundreds of pages of documents, but there is mention of Nacchio believing the request was both inappropriate and illegal, and repeatedly refusing to go along with it.

The NSA contract was awarded in July 2001 to companies other than Qwest.

USA Today reported in May 2006 that Qwest, unlike AT&T and Verizon, balked at helping the NSA track phone calling patterns that may have indicated terrorist organizational activities. Nacchio’s attorney, Herbert Stern, confirmed that Nacchio refused to turn over customer telephone records because he didn’t think the NSA program had legal standing.

In the documents, Nacchio also asserts Qwest was in line to build a $2 billion private government network called GovNet and do other government business, including a network between the U.S. and South America.

The documents maintain that Nacchio met with top government officials, including President Bush, Vice President Dick Cheney and then-National Security Adviser Condoleeza Rice in 2000 and early 2001 to discuss how to protect the government’s communications network.

They portray U.S. government officials, even before the Sept. 11 terrorist attacks, worried about a “Pearl Harbor” type of attack on the Internet. As early as 1997, a three-star general talked to Nacchio about using Qwest’s new fiber-optic network for government purposes, according to the defense.

One key meeting with a government official was held at Qwest founder Phil Anschutz’s ranch near Greeley, with former Chief Financial Officer Robin Szeliga prevented from attending presumably because she lacked security clearance.

Nacchio was on a Bush-appointed national security telecommunications advisory panel. In March 2001, then-counter-terrorism adviser Richard Clarke asked the panel if it would be possible to build a private network for the government to protect it from cyberwarfare.

Nacchio piped up: “I already built this network twice” for other government agencies. The defense asserts Nacchio believed Qwest would be asked to build the network and that it could do so in six months.

But the contract didn’t materialize.

Looking ahead

DATES SET

Government’s response to Nacchio’s appeal brief is due Nov. 9. Nacchio could choose to file a reply to the government’s brief by Nov. 20. Oral arguments at the 10th Circuit Court of Appeals are scheduled for Dec. 18 in Denver. In the meantime, Nacchio is free pending appeal.

• Order new trial based on errors made by U.S. District Judge Edward Nottingham.

EXCERPTS FROM NACCHIO’S APPELLATE BRIEF

• “The indictment, trial and conviction of Joseph P. Nacchio took place in an atmosphere of prejudgment and vitriol.”

• “Many shareholders lost paper fortunes, employees lost jobs as the company downsized, and all demanded someone to blame.”

• “After years of investigation, prosecutors apparently concluded that they could not prove any crime based on the accounting restatement, and settled on insider trading.”

• “This is an unprecedented prosecution. The extraordinary charges here are based on the claim that Nacchio knew, eight months or more in advance, that Qwest might not make its year-end 2001 financial projections.”

• “The prosecution yoked an unprecedented theory to plainly insufficient facts, and hoped, in a bitter and vindictive atmosphere, that it would be enough to win a conviction from a Denver jury. It was.”

Should AT&T Be Held

Responsible For NSA

Cooperation?

The Bush administration’s remarks about retroactive legal protection for telecommunications companies show Washington has become an even more surreal place than usual.

First, President Bush said on Wednesday that federal law “must grant liability protection to companies who are facing multi-billion-dollar lawsuits only because they are believed to have assisted in the efforts to defend our nation following the 9/11 attacks.”

Then Ken Wainstein, the Assistant Attorney General for the National Security Division, waxed eloquent with a surfeit of “allegedlys”:

Here you have allegedly companies that stepped up and answered the government’s request to assist the government in efforts to protect against a second wave of attacks after 9/11 and protect against the ongoing terrorist threat… And any such companies who would have undertaken anything like that would have presumably done it for that very purpose. As far as I can see, there’s no real, you know, other ulterior motive or economic motive for doing it. And it just seems at sort of a gut level it seems to me to be unfair to now turn around and have them face, you know, not only the costs and difficult consequences of having to defend against litigation, but based on what I read, you know, potentially crushing liability, you know, to the tune of billions of dollars. And so it’s sort of a fairness matter. That’s where I come out.

I also, as we’ve mentioned before, this litigation does run the risk of disclosing secret information, very classified, sensitive information. Because as you know, all such operations, any alleged operations like this, would be very sensitive and be the kind of thing our adversaries would want to know about. And whenever you litigate something like this, you run the risk that you’re going to disclose this information.

And another thing that also resonates with me is that, you know, any companies that might allegedly have assisted us in the effort against terrorists might well not want it disclosed that, you know, for security reasons, that they did help us out. These would be–any such companies would be companies that would have valid concerns for the safety of their own assets and their own personnel.

Did you catch the last argument? AT&T and the other telecommunications companies that may have opened their networks to the Feds are worried about “the safety of their own assets and their own personnel” if word got out.

This is a fine example of McCullagh’s Law in action: Unless you vote my way, Americans will die. (Is the Bush administration really serious about this, by the way? Do they think that gun-toting privacy activists will start kidnapping or shooting AT&T network technicians?)

Anyway, maybe I’m just old-fashioned, but it strikes me that if a company violated the law, they should be held accountable. I might feel differently if the law is unjust, but I’m not convinced that’s the case here.

18 USC 2511 generally says that anyone who “intercepts” a private electronic communication or “discloses” the results of that interception shall be imprisoned for up to five years. In addition, 50 USC 1810 says that anyone “who has been subjected to an electronic surveillance” of this sort can sue for punitive damages and attorney’s fees.

AT&T and any other company that may have cooperated with the National Security Agency’s warrantless wiretapping scheme knew these two laws existed to protect Americans’ privacy. Its executives knew that breaking the law carried civil and criminal penalties. If they nevertheless went along with the NSA’s secret requests–and violated their own customers’ privacy in the process — why shouldn’t their executives and shareholders pay the price?